Douglas Getson PE, Global Product Manager, ZA Transformer Day, May 2013
Energy Efficiency
Cost of Losses
© ABB Group
May 20, 2013 | Slide 1
Agenda

Network Impact




Total Ownership Cost

Definition

Net Present Value
Loss Capitalization

A & B factors

Payback method
Case Study

© ABB Group
May 20, 2013 | Slide 2
Transformer losses
Renewable energy
Distribution Transformers
Impacting efficiency of the networks
© ABB Group
May 20, 2013 | Slide 3

Losses in Distribution Transformers
(DT) represent a considerable part of
the total distribution losses

Europe T&D losses represent 7% of
the total generated power with DT
representing 25% of the total losses

DT average load varies typically from
10-60%. Therefore, no-load losses
can be a significant component of DT
total losses.

High variability average loads makes it
important to evaluate based on total
ownership cost when defining the
most economical solution
Distribution Transformers
Typical Losses for 1500 kVA transformer
© ABB Group
May 20, 2013 | Slide 4

No-load losses remain constant not impacted by the transformer load

Load losses increase by the square of the loading (LL x Load2)

No-load losses exceed load losses for loads less than 65% nameplate
Transformer Design
Optimising for optimal losses

Transformer designers can alter the design to provide a
solution with reduced no-load, load losses or both.

Improvement in performance requires in most cases a more
expensive transformer with possibly a larger footprint

A trade off is required between high efficiency (high initial cost)
and life cycle cost savings (loss evaluation) when improving
transformer efficiency
Ways to Reduce NL Losses
Use better grade of core material
Use copper rather than aluminum
Use thinner core steel laminations
Use a conductor with a larger area
Use more turns in the coil
Use fewer turns in the coil
Use a core with larger leg area
© ABB Group
May 20, 2013 | Slide 5
Ways to Reduce Load Losses
Total Ownership Cost
Definition
© ABB Group
May 20, 2013 | Slide 6
Total Ownership Cost
Definition

Total Ownership Cost (TOC) of a transformer is the sum of its
1.
2.
3.
4.

Purchase price
Installation and commissioning cost
Operating and maintenance cost over useful life (e.g. 20-30 years)
Emissions cost (depending on regulations)
Cost to operate and maintain a transformer should be recalculated at
today’s cost; this is called present value of future cost

In order to calculate the present value, one must know the discount
value and number of future years
Purchasing decisions requires the right balance between
purchase price and future cost to operate transformer
© ABB
22/07/2009 | Slide 7
Optimal transformer design
Lowest operating cost

Optimal design is
where sum of
purchase price and
operating costs (cost of
losses) are at their
lowest

Lowest operating costs
normally requires
higher manufacturing
costs

Higher manufacturing
costs lead to higher
purchase price

Transformer OEM
would need to know
the operating costs or
loss capitalization
factors ($/watt) to
design an optimal
transformer
© ABB
22/07/2009 | Slide 8
Present Value Calculation
Discount factor
𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝑃𝑃 𝑥𝑥 𝑅𝑅
(1 + 𝑖𝑖 )𝑛𝑛 − 1
𝑃𝑃𝑃𝑃𝑃𝑃 =
𝑖𝑖 (1 + 𝑖𝑖 )𝑛𝑛
© ABB Group
May 20, 2013 | Slide 9

Present Value (PV) expresses future
income or expenses (R) in present day
value (time (n) = 0) using time value of
money.

Time value of money being the discount
factor (i) earned on money or cost of
money

Present Value Factor (PVF) is multiplied by
annual income or expenses (R) to find PV

Companies have a different discount factor
rate and so must be individualized case by
case
Note: Discount factor is usually referred in financial terms as Weighted Average Cost of Capital
(WACC); WACC depends on cost of money made up of debt (bonds) and equity
Present Value Calculation
Time value of money

Your money is worth more today than in the future

Inflation reduces the purchasing power of future money
relative to current ones

Overall uncertainty increases as one looks out further
into the future.


The promise to pay 100 USD in 30 days is worth
more than 100 USD in 90 days
Waiting to receive your money carries an opportunity
cost associated with it as one is foregoing an
opportunity to invest in the next best alternative
Large discount rates reflect higher cost of capital and increased
opportunity cost which results in lower present value factor
© ABB Group
May 20, 2013 | Slide 10
Present Value Calculation
Time value of money
Cost to operate
transformers
from a present
value
perspective
becomes more
expensive as
useful life
increases and
as cost of
money (%
discount factor)
becomes less
(1 + 𝑖𝑖 )𝑛𝑛 − 1
𝑃𝑃𝑃𝑃𝑃𝑃 =
𝑖𝑖 (1 + 𝑖𝑖 )𝑛𝑛
PV FACTORS - Discount Factor (%) vs Project Life (yrs)
5.0%
6.0%
8.0%
12.5%
15.0%
17.5%
20.0%
30
15.37
13.76
11.26
7.77
6.57
5.67
4.98
25
14.09
12.78
10.67
7.58
6.46
5.61
4.95
20
12.46
11.47
9.82
7.24
6.26
5.49
4.87
15
10.38
9.71
8.56
6.63
5.85
5.21
4.68
10
7.72
7.36
6.71
5.54
5.02
4.58
4.19
Discount factor (%) and project life (yrs) have an opposite
impact on the present value factor
© ABB Group
May 20, 2013 | Slide 11

As discount factor increases it decreases the PVF

And as project life decreases it decreases the PVF
Net Present Value
Example
𝑃𝑃𝑃𝑃 =
C
A
S
E
#
1
(1 + 9%)8 − 1
𝑥𝑥 100 𝑈𝑈𝑈𝑈𝑈𝑈
9%(1 + 9%)8
NPV= -180 USD
(570-750)
+30% Cost
C
A
S
E
#
2
© ABB Group
May 20, 2013 | Slide 12
2x Savings
NPV Case #2 > Case #1
NPV= +121 USD
(1096-975)
Transformer Ownership Cost
Example, 1500 kVA
Design Comparison
RGO
Rated Load, kVA
1,500
No-load losses, watts 4,900
Load Losses, watts
11,600
Price US$
30,000
AM
1,500
1,470
12,180
34,500
Delta
-70%
5%
15%
Compare the Total Ownership Cost between a regular grain
oriented (RGO) versus an amorphous (AM) core transformer
© ABB Group
May 20, 2013 | Slide 13

AM No-load losses are 70% lower than RGO but….

AM load losses are 5% higher

AM priced 15% higher
Transformer Ownership Cost
Example, 1500 kVA


5.0%
6.0%
8.0%
12.5%
15.0%
17.5%
20.0%
PV inputs for a factor of 11.76

6% discount rate

20 year life expectancy
Which is the least expensive on total cost basis?

Total Watts (trafo) at 40% Load Factor
TW = NL + (LL x LF2)

Annual Watt-hrs = TW x 8760 hrs/year

Annual Cost at $0.065/kWh
Annual Cost ($) = Watt-hrs x $/kWh

Cost of Losses = PV x Annual Cost
© ABB Group
May 20, 2013 | Slide 14
PV FACTORS - Interest (%) vs Project Life (yrs)
Price
COL
TOC
RGO
$30,000
$44,123
$74,123
AM
$34,500
$22,328
$56,828
Delta
+15%
- 49%
- 23%
30
15.37
13.76
11.26
7.77
6.57
5.67
4.98
25
14.09
12.78
10.67
7.58
6.46
5.61
4.95
20
12.46
11.47
9.82
7.24
6.26
5.49
4.87
15
10.38
9.71
8.56
6.63
5.85
5.21
4.68
10
7.72
7.36
6.71
5.54
5.02
4.58
4.19
RGO 1500 kVA - PV COL - 6% & 20 yr Life
Load
Factor
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
Total
Watts
16,500
12,324
9,076
6,756
5,364
4,900
Annual
Watt-hrs
144,540
107,958
79,506
59,183
46,989
42,924
Annual
PV COL
Cost
$9,395 $107,761
$7,017 $80,488
$5,168 $59,275
$3,847 $44,123
$3,054 $35,032
$2,790 $32,002
AM 1500 kVA - PV COL - 6% & 20 yr Life
Load
Factor
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
Total
Watts
13,650
9,265
5,855
3,419
1,957
1,470
Annual
Watt-hrs
119,574
81,163
51,288
29,949
17,145
12,877
Annual
Cost
$7,772
$5,276
$3,334
$1,947
$1,114
$837
PV COL
$89,148
$60,511
$38,238
$22,328
$12,782
$9,601
Loss capitalization
A & B factors
© ABB Group
May 20, 2013 | Slide 15
Total Ownership Cost
Available via www.abb.com/transformers
©
ABB Group
May
20, 2013 | Slide 16
Transformers Ownership Cost
Universal calculator
© ABB Group
May 20, 2013 | Slide 17
Transformer Ownership Cost
Cost of losses (COL)

Transformer future operating expenses are called Cost of Losses (COL)

COL is a function of no-load losses and load losses

Transformer designer seeks an optimal design between production cost and losses

For a utility customer, lower losses results in lower operating cost and deferral of
generation, transmission and distribution capacity investments.

Cost of Losses ($) = (A x NLL) + (B x LL)

A ($/W) = present value (capitalization factor) cost of no-load losses

B ($/W) = present value (capitalization factor) cost of load losses

NLL (W) = transformer no-load losses

LL (W)
= transformer load losses
 A & B Factors are unique to each purchaser of the transformer even to their
respective industry being residential, commercial, industrial and generation.
© ABB Group
May 20, 2013 | Slide 18
Universal Calculator
Capitalizing cost of losses

Present worth inflationary series

Ce = average energy costs ($/kWh)
during first year including generation,
transmission and distribution
investments

n = number of years one is willing to
wait until the accumulated savings
equals invested amount or payback

Iequiv = transformer loading at time of
initial energization (%)

i = annual general inflation rate (%)

p = annual increase in energy cost (%)

z = annual increase in loading (%)
PV
A = Ce × (PV Series (n, i) )
B = Ce × (Iequiv ) × (PV Series (n, i, p, z) )
2
© ABB Group
May 20, 2013 | Slide 19
Reference: ABB Transformer Handbook 3rd edition. Pages 88 – 98: Leonardo-Energy A practical example of loss capitalization
Universal Calculator
Capitalizing cost of losses – example
© ABB Group
May 20, 2013 | Slide 20

Energy Cost
$0.12 per kWh ($1.051 per W-yr)

Payback
10 years

Trafo Loading
35% initially

General Inflation
2% annually

Loading Increase
2% annually

Energy Cost Inflation
3% annually

Operating hours
8760 annually
Universal Calculator
Capitalizing cost of losses – example

Loss capitalization factors



Capitalized no load losses (A)
$9.88 per watt
Capitalized load losses (B)
$1.47 per watt
‘B/A’ ratio
0.15
PV
Present Value of an Inflationary Series
© ABB Group
May 20, 2013 | Slide 21
Universal Calculator
Capitalizing cost of losses – sensitivity
Alternative
calculations
varying the
expected
payback
period while
keeping all
other
parameters
constant
Discount
factor (i) is
the effective
annual
interest
rate based on
payback
years and
general
inflation
Payback
Years
(n)
Discount
Factor
(i)
5
Loss Capitalization
($/Watt)
Ratio
B/A
No-Load
(A)
Load
(B)
22.1%
5.04
0.67
0.13
10
12.2%
9.86
1.47
0.15
15
9.0%
14.49
2.43
0.17
20
7.4%
18.96
3.61
0.19
30
6.0%
27.53
6.89
0.25
Economical value of the losses increase as the payback period (n)
gets longer and cost of money (%) becomes less
© ABB Group
May 20, 2013 | Slide 22
Cost of Emissions
Included within the cost of energy (Ce)

Emissions are also a cost to be considered not only on
environmental but also economic impact

Several nations have agreed on a market value for certain
pollutants (USD/ton) in a ‘Cap and Trade’ arrangement

One can consider such economic costs within the TOC calculation
by adding emissions costs (Cem) to the cost of energy (Ce) for a
total cost of energy (CE) which would take the place of Ce in the
previous equations.
CE =C e +Cem

Emissions cost (Cem) would be calculated by multiplying the
emissions per electricity generated Ep (tons/Wh) by the market
value of the pollutant Ec (USD/ton)
Cem = E p × Ec
© ABB Group
May 20, 2013 | Slide 23
Cost of Losses
A & B capitalization factors versus loading
Example:
A = 8.10 USD/Watt
(No Load Losses)
B = 1.22 USD/Watt
(Load Losses)
B / A = 0.15
SQRT (B / A) = 39%
(Trafo Load)
Lower the B/A or
LL/NL loss ratio, the
lower the average
load of the
transformer.
Or said in another
way, lower
transformer loads
have a lower B/A
ratio.
© ABB Group
May 20, 2013 | Slide 24
Cost of Losses
Loss capitalization sensitivity
Load
Factor
Cost savings by
low-loss
distribution
transformers: the
influence of
fluctuating loads
and energy price
on the economic
optimum
KEMA T&D
Consulting
© ABB Group
May 20, 2013 | Slide 25
No-Load
Factor
Total Ownership Cost
Payback period
© ABB Group
May 20, 2013 | Slide 26
Transformers Ownership Cost
Payback calculator
© ABB Group
May 20, 2013 | Slide 27
Payback Period
Definition
Payback period refers to the number of years a customers
would need to recover the additional investment (e.g. the
higher purchase price for a more efficient transformer) thanks
to the annual savings generated by having lower transformer
operating cost.
Purchasing decisions requires the right balance between
purchase price and future cost of losses.
© ABB
22/07/2009 | Slide 28
Payback Calculator
Comparing two transformer designs
Purchase
premium per
watt saved
($/Watt)
Annual Cost of Energy ($)

Compares purchase price ($) and
losses (watts) of two transformers

Purchase transformer with shortest
payback period (years)

Solve for number of years (n) of annual
energy cost equals purchase premium
per watt savings (PV - Present Value)
PW
PV
Time
Non-inflationary Series (i)
(1 + i ) n − 1
PV = Energy ×
i (1 + i ) n
n=
ln( Energy ) − ln( Energy − PV × i )
ln(1 + i )
© ABB Group
May 20, 2013 | Slide 29

PV = (Price)extra / (Watts)saved

(Price)extra = (Price)T1 – (Price) T2

(Watts)saved = (Watts)T2 – (Watts) T1

Energy ($/kWy) = $/kWh x 8760 hrs

i = discount rate (%)
Note: assumes T1 > T2 watts and T1 < T2 price
Payback Calculator
Comparing two transformer designs – example

Rating
1500 kVA

Average loading
65%

Discount rate
3.25%

Energy cost
$0.095 per kWh ($0.832 per W-yr)

T1 transformer
Price= $30,000
NL= 2200 W and LL= 2125 W
TL = 2220 + 2125 x (65%)2 = 3098 W

T2 Transformer
Price= $34,500
NL= 725 W and LL= 2250 W
TL = 2725 + 2250 x (65%)2 = 1676 W
© ABB Group
May 20, 2013 | Slide 30
Payback Calculator
Comparing two transformer designs – example

T1 versus T2 evaluation

T1 Price Premium
$4,500

Total Watt Savings
1,422 W

Premium per watt saved
$3.164 / Watt

T1 Payback
4.12 years
PV
© ABB Group
May 20, 2013 | Slide 31
Case Study
Renewable energy
© ABB Group
May 20, 2013 | Slide 32
Transformer Ownership Cost
Renewable energy calculator
© ABB Group
May 20, 2013 | Slide 33
Wind Energy Case Study
Collector major electrical equipment
690 V Cable
2.3 MW Turbines
70 at $1.5 M/MW
$242 MUSD
© ABB Group
May 20, 2013 | Slide 39
34.5 kV XLP / PVC Cable
2600 kVA Txfmr
70 at $32k each
$2.24 MUSD
100 MVA Txfmr
34.5:230 kV
$1.35 MUSD
Wind Energy Case Study
Outcome


© ABB Group
May 20, 2013 | Slide 40
250 MUSD equipment cost for 160 MW wind site

70 - 2.3 MW turbines

70 - 2600 kVA 690V:34.5kV padmount transformers

1 -100 MVA 34.5:230kV substation transformer

530 thousand feet - XLP underground cable
0.450 MUSD additional for higher efficiency transformers

$125k (1,842 MWh) additional annual energy sales

Assumption - 30% Income Tax Credit (ITC)

Assumption - 20 yr Power Purchase Agreement (PPA)

25% IRR and less than 3 year payback on investment
Wind Energy Case Study
Generation Profile
 Base case
generation profile
based on actual
wind site in the
United States
 83% generation
hours at or less than
37.5% of generation
capacity
 It’s been reported
that most wind sites
operate on average
at less than 50% of
capacity during the
year
© ABB Group
May 20, 2013 | Slide 41
83% annual turbine
output < 37.5%
Wind Energy Case Study
Core material impact
 Amorphous cores
have lower no-load
(NL) losses by up
70% than grain
oriented
Grain Oriented
Turbine
Output
Energy
Sales
(MWh)
Losses
Losses
Energy
Sales
(MWh)
100.0%
5,880
3.25%
3.17%
5,885
87.5%
68,386
2.91%
2.81%
68,462
62.5%
88,837
2.87%
2.68%
89,008
37.5%
234,890
2.52%
2.17%
235,736
12.5%
50,113
3.22%
2.11%
50,690
0.0%
-208
0.00%
0.00%
-39
447,899
2.78%
2.38%
449,741
 NL Base Cases
 GO 3,900 Watts
745 Watts
 AM
 %Efficiency (LF 1.0)
 RGO 99.06%
 AM 99.13%
 No-load losses are
made up of
hysteresis
(reorientation of
magnetic moments
60 times/sec) and
eddy currents (flow
perpendicular to the
flux broken up by
laminating)
Amorphous
GO MWh < AM MWh sold
© ABB Group
May 20, 2013 | Slide 42
Wind Energy Case Study
PPA price sensitivity
Base Case
 Capacity factor
$70 / MWh
 Generation Profile
 Average energy
price
 ITC vs. PTC
 Unleveraged or zero
debt investment
Not Considered
 Time-of-Day energy
pricing
 Escalation
 P99 debt sizing
 Discount rate
 Transaction
structure
© ABB Group
May 20, 2013 | Slide 43
Note: Financial analysis completed by Competitive Energy Insight, Inc., San Diego, CA
© ABB Group
May 20, 2013 | Slide 44